David K.H. Begg, Gianluigi Vernasca-Economics-McGraw Hill Higher Education (2011)

26.2 Growth: an overview
In the long run, population growth may be affected by per capita output, which
affects the number of children people decide to have, and the health care and
nutrition people then get. Nevertheless, we simplify by assuming that the rate of
population growth is independent of economic factors. Thus we assume that
anything that raises output also raises per capita output.
The production function
shows the maximum output
obtainable from specified
quantities of inputs, given the
existing technical knowledge.
Capitol
Productive capital is the stock of machinery, buildings and inventories with which other inputs combine
to make output. For a given labour input, more capital raises output. However, capital depreciates over
time. Some new investment is needed just to stop the existing capital stock from shrinking. And with a
growing labour force, even more investment is needed if capital per worker is to be maintained. With yet
faster investment, capital per worker rises over time, increasing the output each worker can produce.
Higher capital per worker is a key means of raising output per worker and per capita income.
Labour
Employment can rise for two reasons. There may be population growth, or a larger fraction of a given
population may have jobs. Labour input also depends on hours worked per person. For a given number of
workers, more hours worked raises effective labour input, thus raising output.
Weekly hours worked have fallen a lot since 1870. The rise in per capita real output in Table 26.l does not reflect
longer hours. Since 1945, labour input has risen mainly because more women have joined the labour force.
Human capitol
Human capital is the skill and knowledge embodied in the minds and hands of workers. Education, training
and experience allow workers to make more output. For example, much of Germany's physical capital was
devastated during the Second World War but the human capital of its labour force survived. Given these
skills, Germany recovered rapidly after 1945. Without this human capital, there would have been no postwar
German economic miracle.
Land
Land is especially important in an agricultural economy. If each worker has more land, agricultural output
is higher. Land is less important in highly industrialized economies. Hong Kong and Singapore have grown
rapidly despite overcrowding and a scarcity of land. Even so, more land would help.
Increases in the supply of land are pretty unimportant to growth. In theory, land is the input whose total
supply to the economy is fixed. In practice, the distinction between land and capital is blurred. By applying
more fertilizer per acre, the effective quantity of farming land can be increased. With investment in
drainage or irrigation, marshes and deserts can be made productive. Dubai built superstar homes, hotels,
and even a new airport, on land reclaimed from the sea.
Row materials
Given the quantity of other inputs, more input of raw materials allows more output. When raw materials
are scarce and expensive, workers take time and care not to waste them. With more plentiful raw materials,
workers work more quickly.
When a barrel of oil has been extracted from the ground and used to fuel a machine,
the world has one less barrel of oil reserves - it is a depletable resource. If the
world has a finite stock of oil reserves, it will eventually run out of oil, though
perhaps not for centuries.
Depletoble resources can
be used only once.
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